Scott Burrill - Market Notes

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Scott's notes
Scott's Market Notes

Advantage, Active Management

Apr 20, 2020

The Fed is the wind at the market's back and is doing its part to keep the pipes flowing.

Just in time for another Earnings Season, Implied Correlation in all major indices, except for the Russell 2000 continues to focus our attention on sector rotation and stock selection. Moreover, whether thematic ETFs or component holdings, countless potential long-short combinations avail themselves. This regime now lends itself particularly well to active investors, traders, and quantitative strategies.

While certainly the Top 5 stocks of MSFT, AAPL, AMZN, and GOOGL garner the most press and power the S&P 500 and Nasdaq 100 higher, a new regime is emerging tied to fighting the virus, improving company efficiency, and meeting consumers' needs.

With 86 companies in the S&P 500 reporting earnings this week, focus and interest are on management's outlook; however, that is likely guarded at best. According to FactSet, analysts now predict a year-over-year decline in earnings for the second quarter of 26.6%. The market isn't undervalued with a forward P/E of 18.5.

Notable names reporting this week. Netflix is on deck with an 11.52% option implied move, and it will be particularly interesting to hear comments from Delta Airlines on the state of air travel on Wednesday.

The Economic Calendar is of interest for weekly jobless claims and consumer sentiment. Still any releases are secondary to news related to the pandemic and the prospects for reopening portions of the economy.

The S&P 500 Weekly Option Implied Move is + / - 111 points or 35% implied volatility with a range of 3098 to 2762.

Volatility has eased month-to-date but is still holding firmly higher.

The conservative weekly trend model still hasn't turned broadly up; however, the daily trend model flipped positive 18 trading days ago.

Updated Index, Commodity, and Treasury Levels.

Have a great week.

All the best,

Scott

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